As many are aware, there is a reasonably good directional correlation (especially at inflection points) between oil prices and retail stocks (and it even makes some economic sense!).

I have enclosed some charts to illustrate my point.

Retail stocks have benefited from the $10-a-barrel drop in the price of crude over the past month or so. Should oil continue today's reversal, I think you might see some selling in the sector over the near term.

First, the easy overlay chart:

Next, the 12-month rate of change vs. the

S&P Retail Index

(RLX) -- ignore the yellow line on the RLX chart):

Finally, the crude rate of change vs. the RLX's relative performance to the

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S&P 500


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At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.

Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.